What If it Never Happened? Subjective Treatment Effects of a Negative Shock on Youth Labour Market Outcomes in Developing Countries

40 Pages Posted: 6 Sep 2023

See all articles by Marta Favara

Marta Favara

University of Oxford - Department of International Development

Richard Freund

University of Oxford

Marcello Perez-Alvarez

University of Göttingen

Abstract

This paper examines the subjective treatment effects of a negative shock created by the COVID-19 pandemic on the labour market outcomes of young adults in India, Peru, and Vietnam. We leverage subjective counterfactual outcomes at the individual-level that were purposely collected from over 7,000 individuals to this aim. Our findings suggest that the shock denied employment opportunities and reduced earnings. On average, the pandemic reduced monthly earnings by 19.4% and employment levels by 17.5% in our three-country-sample. Country-specific magnitudes are lowest for India and highest for Vietnam. However, these average effects belie that a substantial proportion of individuals, particularly those from disadvantaged backgrounds, are pushed into employment by the pandemic. This frequently comes at the expense of their education, hinting at youth labour acting as a buffer against transitory shocks. According to our findings, the perceived effects of the pandemic on labour market outcomes carry important implications for young people's well-being and behaviour. Individuals who are denied employment display significantly higher rates of anxiety, lower rates of COVID-19 vaccination, and lower desired fertility.

Keywords: subjective treatment effects, labour market, COVID-19, youth, developing countries

JEL Classification: J21, J11, C21, C83, D84

Suggested Citation

Favara, Marta and Freund, Richard and Perez-Alvarez, Marcello, What If it Never Happened? Subjective Treatment Effects of a Negative Shock on Youth Labour Market Outcomes in Developing Countries. IZA Discussion Paper No. 16417, Available at SSRN: https://ssrn.com/abstract=4559543 or http://dx.doi.org/10.2139/ssrn.4559543

Marta Favara (Contact Author)

University of Oxford - Department of International Development ( email )

United Kingdom

Richard Freund

University of Oxford

Mansfield Road
Oxford, OX1 4AU
United Kingdom

Marcello Perez-Alvarez

University of Göttingen ( email )

Wilhelmsplatz 1
Göttingen, 37073
Germany

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